moral hazard

[John Mage]

Perhaps the slimiest most wicked tactic of bankers with political pull
is simultaneoudly to go short and to advise "tough"crisis or panic
creating measures. It has a very long history. E.g., in early 1834 Joseph
Brothers, New York brokers, worked hard with their newspaper publisher
partner Webb (by newspaper advice and political pressure) to stop the
2nd Bank of the United States from relaxing credit to terminate the
panic set off by the withdrawal of the  treasury deposits. They were
short. T.P. Govan, _Nicholas Biddle_ (1959) p.260.

But giving self-interested advice in order to make money on the misery 
of other
property owners (their clients, often) is, for obvious reasons, normally 
disguised.

How shameless then this partial quote in today's NYTimes from a Goldman 
Sachs
spokesperson:

 > "We're probably in the same scenario as in 1998, where the goal is

 > financial sector stability, no matter how you get there," said

 > Kathy Matsui, an equity strategist at Goldman, Sachs in Tokyo. "The

 >  government will do just enough to get through this, and Takenaka's

 >  team will have to pray that it's enough."

 >

 > A compromise with the banks, Ms. Matsui said, might prop up stocks

 > in the short term but would antagonize investors who had taken the

 > government at its word and sold Japanese assets in anticipation of

 > tough action.

<http://www.nytimes.com/2002/10/17/business/worldbusiness/17YEN.html>

john mage